exv10w1






Exhibit 10.1









	 	 	 	 	 	 	 
	 

	 	A subsidiary of Pinnacle West Capital Corporation	 	 
	 
	 

	 	Donald E. Brandt
	 	Tel 602/250-5602
	 	Mail Station 9042
	 

	 	President and Chief Executive Officer
	 	Fax 602/250-3303
	 	PO Box 53999
	 

	 	 	 	 	 	Phoenix, AZ 85072-3999






June 17, 2008




Mr. James R. Hatfield

6300 N.E. 109th Street

Edmond, OK 73013




Dear Jim,



I am delighted to extend to you this offer to become the Senior Vice President & Chief Financial
Officer of both Pinnacle West Capital Corporation and Arizona Public Service Company. The details
of our proposal are included in Attachment A.



If you are in agreement with the terms of our offer of employment as described herein, please sign
as requested below.



Jim, I am confident that this will be a challenging and rewarding opportunity for you. Bill Post
and I are excited about the prospect of you joining our team and we will personally do all we can
to ease your and your family’s transition. We look forward to your contributions to our
organization.



If you have any questions, please do not hesitate to contact me.




Sincerely,




/s/ Donald E. Brandt




DB08-07/ps



Signing this letter indicates your acceptance of the terms of this offer.




	 	 	 	 	 	 	 
	Acceptance: 

	 	/s/ James R. Hatfield
 

	 	Date: 6/18/08

	 	






 









 






Attachment A





	•	 	Annual base salary of $450,000.
	 
	•	 	Hiring incentive of $200,000 payable during the first two weeks of your employment, and
$100,000 paid within two weeks of the first anniversary of your employment date.
	 
	•	 	4 weeks vacation annually
	 
	•	 	Vehicle allowance of $10,000 per year
	 
	•	 	Participation in the officer annual incentive plan with a target payment of 50% and up
to a maximum of 100% of annual base salary. Annual incentive payments are dependent on
company and business unit performance and are generally paid during the first quarter of
the subsequent year. Incentive for 2008 will be prorated based on employment date.
	 
	•	 	Long-Term Stock Based Compensation: Typically awarded annually, with the average base
award for senior vice presidents representing a target equity face value of approximately
$260,000 that vests over four years.






	 	o	 	At the next Human Resources Committee meeting following your hire date,
the Committee will be asked to approve: (1) an award of 1,400 performance shares
which will vest on 2/1/2009; (2) an award of 2,000 performance shares which will
vest on 2/1/2010; (3) an award of 3,400 performance shares which will vest on
2/1/2011; (4) an award of 2,500 restricted stock units that will vest through
2/1/2011 and (5) an award of 3,500 restricted stock units that will vest through
2/1/2012. The intent of these awards is to establish your standing on a pro-rata
basis within the three long-term performance cycles that are currently running for
other officers.






	•	 	Participation in the Supplemental Executive Retirement Plan. The SEBRP is structured as
a cash balance plan that the company contributes a percent of your base and annual
incentive compensation as follows:





	 	 	 	 	 
	 	 	Percent of Monthly
	Age	 	Compensation Contribution
	40–44
	 	 	16	%
	45–49
	 	 	20	%
	50–54
	 	 	24	%
	55 and over
	 	 	28	%







	•	 	Financial planning benefit of $7,500 the first year utilized and $3,750 each subsequent
year.





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	•	 	Deferred Compensation Plan (DCP):






	 	o	 	The DCP provides you with the opportunity to defer part of your
compensation on a pre-tax basis. The deferred amount also earns interest. The
company sets the interest amount each calendar year. (For the last several years,
the interest rate has been 7.5%)






	•	 	Historically, we have provided officers with Key Executive Employment & Severance
Agreements for change of control purposes. In the event of payment under this plan, you
would receive 2.99 times base salary and annual incentive as described in the document.
	 
	•	 	If you enroll in the company’s benefit program within the first 30 days of employment,
your medical, dental, and life insurance will be effective on your one-month anniversary
date of employment. Medical and dental plan premiums are on a pre-tax basis. We will
provide you with a payment equal to the cost of your OGE COBRA coverage (grossed up for
taxes) to bridge your medical coverage until the effective date of your coverage under the
Pinnacle and APS plan.
	 
	•	 	Relocation benefits will include household goods transportation and storage, temporary
living up to six months or longer if business needs arise, and home sale and home finding
assistance. So as to facilitate and expedite your relocation, you may elect any home sale
option under our executive relocation program without regard to any time periods that
generally apply.




All items of compensation, and all benefits, that are provided pursuant to a compensation or
benefit plan will be subject to the terms and provisions of the relevant plan.



This offer is contingent upon successful completion of a pre-employment medical screening and
background check.





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